Investor Relations

Solomon Systech Returns to Profitability

Sales Up 13% to US$31.1 Million

Focuses on Smart Product Applications to Drive Sustainable Growth

 

 

Financial Highlights:

 

  For the six months ended 30 June  

2013

2012

 Change
 

US$’m

(HK$’m equivalent)

US$’m

(HK$’m equivalent)

  
Sales 31.1 241.4 27.6 213.7 +13%
Gross Profit 12.8 99.0 11.6 90.1 +10%
Gross Margin 41.0% 42.2%
Results From Core Businesses* 0.8 5.9 (1.4) (10.7)
Net Profit / (loss) 0.8 6.4 (1.8) (14.2)
Earnings / (loss) per share 0.03 US cent 0.26 HK cent (0.07 US cent) (0.58 HK cent)

 

* Refers to the design, development and sales of proprietary IC products and system solutions 

 

 

(Hong Kong – 22 Aug 2013) – Solomon Systech (International) Limited (“Solomon Systech” or “the Group”; SEHK: 2878) returned to profitability and its various business units continued to achieve growth during the six months ended 30 June 2013 (“1H 2013”). 

 

Despite the uncertain macroeconomic conditions and a rapidly changing industry landscape, Solomon Systech recorded total sales of US$31.1 million, an increase of 13% year-on-year, while total shipments increased by 4% to 47.8 million units.  This was mainly due to the Group’s strategy to direct focus on innovative, high value-added smart product applications, which effectively raised the blended average selling price of its products.

 

Gross profit increased from US$11.6 million to US$12.8 million, with gross profit margin at 41.0% (1H 2012: 42.2%).  Excluding the provision reversal for slow moving inventory of US$0.3 million and US$1.2 million for the 1H of 2013 and 1H of 2012 respectively, there was an effective increase in gross margin from 37.7% to 40.2%.

 

As the result of increased sales and effective cost controls, the Group achieved a profit from core businesses of US$0.8 million (1H 2012 loss: US$1.4 million).  After including a reversal of tax provision, the Group recorded a net profit of US$0.8 million, thus returning to profitability – having incurred a loss of US$1.8 million for the same period last year.

 

Dr. Humphrey Leung, Managing Director of the Group, said, “We are pleased that the Group successfully achieved a turnaround during the review period.  Our strategy of focusing on high-growth, high-volume smart applications has proven to be effective.  Our continued efforts in enhancing organizational efficiency and core competencies, as well as in bolstering new product development to achieve more design wins have strengthened our foundation for growth.”

 

 

Business Review

 

For the Mobile Display business, actual sales from Mobile Display products recorded an increase of around 9%, owing to the Group’s strategy of shifting business focus towards smartphone and tablet applications with higher resolutions and higher average selling prices, thus offsetting the decrease in unit shipments.  During 1H 2013, the Group’s TFT LCD display driver ICs supporting HD smartphone applications scored design wins with key smartphone brands in China and commenced mass production.  Its newly developed HD LCD display driver ICs supporting metal oxide TFT technology have secured design-in projects with top-tier customers, and are expected to start mass production in the 2H of the year.

 

The total unit shipments of Mobile System products increased by 17% to 5.8 million units due to surging demand for high-speed MIPI display interface controller ICs that target high resolution, high speed and low power display of FHD and WQXGA smart devices, in particular tablets.  The new MIPI solutions launched at the end of last year has scored additional design wins with global brands.  To enhance the features and performance of capacitive touch panel controller ICs, the Group has added skilled resources and devised a new positioning strategy and marketing plan.  These efforts should help boost business growth in 2H 2013.

 

For the Advanced Display business, unit shipments rose by 5% to 28.2 million units.  The Group has progressed well on the electronic shelf labels business, securing additional design wins.  It launched a new AMEPD (AM e-paper) display driver IC, targeting applications that require the display of complex content in high resolution and low power consumption, such as QR codes.  The Group’s PMOLED display driver ICs garnered design wins and continued high volume production for applications. In addition, the Group has successfully produced a qHD AMOLED display driver IC for panel development.

 

Regarding the Large Display business, total unit shipments increased by 51% year-on-year to 5.4 million units.  The growth momentum of China’s large TFT LCD panels was partially hindered by the need to deplete excess inventory.  Such inventory was the result of a surge in production capacity of TFT LCD panel plants in 2012.  Nevertheless, the Group has developed and submitted two sets of new large TFT driver ICs for customer qualification, and the process is expected to be completed in 2H 2013, which is expected to lead to further advancement of the Large Display business.

 

The Green Power business unit has achieved a 219% year-on-year increase in total shipments of LED solutions, as the strategy of targeting high quality and high value-added products has attracted more top-tier customers.  The Group has also been certified by Cree, a world leader in LED technology, as its LED Solution Provider, which is a strong endorsement of the excellent quality and performance of Solomon Systech’s products and services.

 

 

Prospects

 

Staying focused on smart product display applications to drive growth

 

High performance smartphones and tablets with high-resolution displays are expected to continue to be the key growth drivers of the consumer electronics market.  Solomon Systech is developing more innovative products and technologies that enable low-power, high-resolution and high-speed displays to capitalize on this market trend.

 

A number of new products supporting smartphones and tablets applications are in the pipeline and are expected to ramp up in 2H of 2013, including the high resolution TFT LCD display driver ICs and high speed MIPI display interface controller ICs.  The metal oxide TFT LCD display driver ICs that have started pilot shipments are expected to begin mass production, while the TFT LCD display driver ICs supporting in-cell touch technology are targeted to be launched in 2H 2013.  A more diversified product portfolio of touch panel controller ICs covering multiple applications will contribute to total shipments and sales growth in the future.

 

As for smart TVs, the Group will continue to target the China as its key market by developing more new TFT LCD driver ICs for TVs and computer monitors.  This is in line with the business objectives and future business plans of its anchor customer in China, Nanjing CEC Panda LCD Technology Co., Ltd.

 

For other smart devices, particularly bistable displays, the Group remains positive about their growth.  In addition to ESL applications, it plans to boost its AMEPD businesses to capture rising demand and contribute to overall sales.  The Group also plans to strengthen the LED lighting business by focusing on high quality, high performance applications to target top-tier customers, and also working on the development of OLED lighting solutions.

 

Dr. Leung concluded, “Now with a strengthened foundation in terms of product offerings, technical competence, customer services and marketing outreach, the Group sees potential for further growth as more and more innovative products are being launched into the market and commencing mass production. Nonetheless, we shall remain vigilant in monitoring changes in the global economy and the industry landscape, as uncertain macroeconomic environment and rapidly changing industry landscape can make consumers increasingly cautious in placing long term orders.”